We propose to develop a method to differentiate human Embryonic stem cells into hematopoietic stem cells that can be transplanted in adults and differentiated in vitro into adult red blood cells (RBCs). To achieve this goal we will attempt to recapitulate the stem cell niches in which HSC normally develop, using chemically defined conditions, combined with elimination of unwanted signals in the culture produced by spontaneously differentiating cells in the culture. Aim 1 A: To develop a procedure to produce adult hematopoietic cells from human ES cells by blocking the differentiation of non-mesodermal cells by RNAi against transcription factors, and by adding a sequence of chemically defined developmentally appropriate signals. Aim 1 B: To attempt to recapitulate in vitro the essential signals of the AGM niche in which HSCs normally develop in vivo. Aim 2: To create a universal inducible system to negatively select for cells that do not express a specific promoter by using an inducible FKBP-caspase-8 gene that can induce apoptosis upon addition of a dimerizer. Combined with tissue specific cre-mediated recombination, this system will allow for the elimination of unwanted cells in differentiating hESCs culture system. The scope of this project is very relevant to the mission of the NIH National Heart Lung and Blood Institute (NHLBI) because it is related to the treatment of blood diseases.